The Decision Maker

Credit unions are well aware of the growing revolution in payments. A recent report by McKinsey & Company (Global Payments 2015: A Healthy Industry Confronts Disruption) noted that, the growth of nonbank digital competitors over the next five years will increase downward pressure on transaction margins while increasing growth in electronic payments.

The drivers for this trend are all too familiar:

Large technology companies such as Apple, Google, Facebook, Amazon, Microsoft, Tencent and Alibaba, are some of the most significant nonbank competitors. These organizations are cash-rich and have virtually captive customer bases.

Smartphones have become a crucial channel in the world of payments. With these devices comes a swarm of payment options. These range from the likes of Apple Pay to “In-App” purchases that provide an almost seamless user experience.

Member expectations for technology-enabled experiences have grown considerably. Today’s members, like any other consumers, have experienced an unprecedented level of service via nonbank providers. Some may wonder why their favorite credit union does not have the same level of digital service.

Despite all the hype about the electronics payments, adoption by credit union members may tend to be slower than the public at large. Members tend to be more conservative so fewer are likely to be enthusiastic early adopters.

However, this does not mean credit unions are complacent about this growing trend. The industry, especially its larger players, has begun to respond vigorously with various “digital wallet” strategies. While these efforts are in the formative stages, it is imperative that credit unions position themselves to members as the trusted alternative for safe and secure digital payments. From this positioning, members can be educated and motivated to become loyal users of the credit union’s digital payment platform.

A crucial element to make this strategy successful is analytics. Making effective decisions in this fast-paced environment is crucial. The ability to adjust the tactical underpinnings of the strategy on a monthly, weekly, or even daily basis depends on the availability of transactional data for analysis. Having data quickly available at this level of granularity requires a well-designed and well-tuned data warehouse. This tool provides an essential feedback loop for decision makers as they guide the digital payments strategy toward meeting member needs and keeping those payments (and their margins) close to the credit union.

We are missing an opportunity in this space. I would suggest that digital wallets and the associated strategies for a credit union implementation are great and should be pursued. As an industry however, we should own the entire transaction stack from the rails to the transaction. Our mobile transaction rails currently are owned and controlled by companies that are not credit union friendly. Additionally, the advent of blockchain technology will push massive disruption at the current banking infrastructure. Some have predicted the complete demise of banking as it currently exists as a result. Bottom line is the industry is fast approaching the need to innovate or die in my view. With that in mind, there is new pursuit of solutions that address both lines of thinking. Unfortunately, as an industry we remain focused on the wrong things. Instead, we need to think much bigger.

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You now have more information at hand about your credit union than ever before. But are you using it to "out-think" your rivals? If not, you may be missing out on a potent competitive tool.

This blog will:

Educate subscribers about data integration and Big Data and Analytics.